Too late for an early VOD window?

DRM One of the objections raised by opponents of the MPAA’s petition for a waiver of the FCC’s ban on selectable output controls when it was originally filed was that turning off analog outputs for movies in a new premium VOD window would “break” as many 25 million consumer devices that lacked digital connections. While “break” may have been overstating the case a bit — the non-HDCP compliant devices would continue to operate as they always had — and the 25 million figure was disputed, there’s no doubt that some significant number of households would not have been able to access the new service at any price, premium or otherwise.

The MPAA countered that allowing such “high-value” early release content to go over unprotected analog outputs was too risky, given the impact that piracy in an early window could have on downstream distribution channels, and that half a loaf was better than none. Why should no one be able to watch movies in the new window, they asked, just because some people can’t?

If you accept the studios’ first premise — that the business risk from piracy is substantial — then the second premise — that all should not be denied access because some would be – seems to me reasonable. The catch was that evidence indicating the analog hole has been a significant source of pirated content on the web or elsewhere was and is conspicuously scarce. What the studios were left with, then, was an argument from faith (or fear, depending on how you want to look at it): analog-hole piracy could happen, and given the potential economic harm, analog outputs therefore should be turned off.

The FCC ultimately bought the argument and granted the MPAA its petition. But I wonder where that faith-based argument leaves the studios’ plans for an early, premium VOD window now that HDCP itself has been hacked and the analog hole has been replaced with a digital one.

So far, they seem undeterred. Warner, Disney and Sony are all reported to be well-along in talks with Comcast, Cox and Time Warner Cable about making movies available in the new window early next year using SOC to block analog outputs. Warner and Disney have even been talking up the idea at investor conferences, which leaves them pretty firmly on the hook for going ahead (lest they be suspected of blowing smoke to boost the stock).

It is true that exploiting the HDCP hack for purposes of piracy is a non-trivial matter. According to its inventor, Intel, HDCP still needs to be implemented in silicon, which means someone would have to start fabbing chips and building black boxes to do much damage, whereas capturing and copying unencrypted content over analog outputs is as simple as hooking up a DVR. Even ripping a DVD or Blu-ray is a simple matter by comparison, requiring only readily available (albeit illegal) ripper software. As a practical matter, then, the danger from piracy-by-HDCP-hack is very small.

But it’s not zero, and it’s quickly getting bigger. Barely two weeks after Intel assured the world that the master-key hack could not be exploited in software a la DeCSS or AnyDVD, two researchers at Stony Brook University have figured out how to exploit the HDCP master-key hack in software. For now, the software exploit requires some pretty heavy hardware to run it. But the researchers have released their application’s source code as an open-source project, which means that others are now doubtless hard at work refining the code to make it more efficient and lightweight so it will run on ordinary, consumer-grade processors.

It seems likely, then, that the studios will soon face the same sort of hypothetical threat from the digital hole that they went to such lengths to combat with the analog hole: piracy could happen, and the economic damage could be considerable. So what should be done?

Unlike the analog hole, plugging the digital hole is not really an option. There is no technological fix to the HDCP hack and blocking digital outputs along with analog outputs would mean no functioning outputs of any kind. That would be an option, of course, but it would mean no early VOD window for anyone — not even half a loaf this time.

Yet if the studios decide to go ahead with their plans in the face of the hypothetical danger from compromised digital outputs (as I would argue they should), how strong does the case remain for blocking analog outputs?